Farm Lenders Fear Road Ahead May Be Bumpy, Study Finds

Agricultural bankers continue to be concerned about the long-term outlook for farming and rural economic development, according to a recent survey.

In an informal study released last week by the American Bankers Association, 96% of the bankers queried at its Agricultural Bankers Conference in November said enough credit was available in their area.

However, 56% cited a decrease in the number of creditworthy borrowers in their area in the past year, compared with 50% in a similar 1993 survey.

"There is some concern for potential credit problems due to commodities prices, but overall there's significant funds available for lending to the farm sector," said Darcy L. Myers, chairman of the ABA's ag bankers division.

Mr. Myers, who also is vice president of Norwest Bank Denver, said that a drop in prices on commodities, such as cattle and hogs, likely increased bankers' questions about creditworthiness.

Topping bankers' overall concerns in the survey - as in 1993 - was the regulatory environment, cited by 39% of respondents. Rural development and competition followed, with 22% and 18% respectively.

About 37% of survey respondents said they would be able to make more Farmers Home Administration-guaranteed farm loans because of the agency's certified lender program - up from 27% in the previous year's survey.

However, only 32% of the ag bankers overall expected to make more FmHA guaranteed loans in 1995, down from 47% in the 1993 survey. Further, 39% expected to make fewer such loans, up from 30% the previous year.

Mr. Myers said that only some banks make the extra efforts to become certified lenders, which streamlines the loan approval process. Those banks are more likely to make Farmers Home Administration loans, he said.

Other survey responses:

* Only 17% of respondents said they had to pay clean-up costs on environmentally contaminated collateral or property. Still, 73% of respondents said environmental liability laws have affected whether they will make a loan.

* About 62% of respondents were unsure what effect the reorganization of the U.S. Agriculture Department will have on farmers in their area, although 35% said things would be better.

* Likewise, 62% of respondents were unsure how changes in federal crop insurance would affect credit availability in their area. About 37% thought the changes would increase available credit.

* Nearly two-thirds of respondents said there are not enough beginning farmers in their area.

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